Iraq has begun applying a new official exchange rate of 1,520 dinars to the dollar, up from 1,320 dinars, following a cabinet decision on October 6 to adjust the rate on the recommendation of the central bank. The dollar exceeded 168,000 dinars per $100 in Baghdad’s parallel market during the first hours of trading.
The decision was based on the amended Central Bank Law No. 56 of 2004. The Central Bank of Iraq said the adjustment came in light of “the current economic and financial conditions,” confirming that its foreign-exchange reserves were sufficient to finance foreign trade, settle bank cards abroad and meet travelers’ cash needs.
Fears of higher prices
The exchange-rate change was reflected in trading at Baghdad’s Harithiya market, where market participants are watching price trends and their impact on buying and selling activity. Importing traders face higher costs for goods, while consumers are becoming more cautious about spending as purchasing power declines.
Ali Youssef, a currency-market trader, said ordinary citizens would be the first to feel the impact of the stronger dollar as its effects feed through into food prices and household necessities. He expected lower-income groups to be hit hardest, given Iraq’s reliance on imports and weak domestic production.
Abdullah al-Jumaili, an employee at a pharmaceutical company, said the rising dollar had begun to affect market activity and demand, noting that the exchange-rate change reduced the real value of salaries and wages and increased expenses across all income groups.
Hedging Against Foreign-Exchange Pressures
The government linked its measures to pressures on Iraq’s foreign-exchange resources amid the budget’s reliance on oil revenues. Mazhar Mohammed Saleh, the prime minister’s financial adviser, said the dinar’s stability against the dollar and other foreign currencies was tied to the availability of foreign exchange and the economy’s ability to finance foreign trade.
Saleh said the fallout from regional and international crises, including disruptions that could affect oil exports through the Strait of Hormuz, could weigh on oil revenues, the public budget and foreign-exchange flows, making precautionary measures necessary.
The measures taken do not mean there is an imbalance in the economic situation; rather, they are part of advance precautionary planning and the protection of economic, financial and monetary stability.
Saleh added that the measures were aimed at building a financial and monetary safety margin to help the economy cope with exceptional circumstances, while continuing to provide essential goods and services and preserve purchasing power and domestic stability.
Mixed Impact on Public Finances
A higher dollar rate could increase the dinar value of oil revenues collected in dollars, but it would also raise import costs in an economy that relies on foreign sources for a large share of its needs.
Wiam Saber, a banking compliance and supervision specialist, said a higher dollar exchange rate against the dinar could support state treasury revenues because oil receipts are collected in dollars and then recorded in the public budget in dinars. He noted, however, that weak domestic production limited the market’s ability to offset higher import costs with locally produced goods.
Earlier Denial of an Exchange-Rate Adjustment
The decision came about four months after the authorities denied that there were plans to adjust the dinar’s exchange rate. In June 2026, the government denied any intention to print currency or devalue the dinar, while the central bank also denied plans to change the rate after a forged document circulated claiming that the dollar rate would be raised to 1,600 dinars.
